Splash247: Putin pushes BRICS insurance challenge to Western shipping establishment

Published by Splash247

Vladimir Putin has urged the world’s largest emerging economies to accelerate the creation of their own reinsurance mechanism, adding momentum to efforts that could eventually loosen the maritime industry’s century-long dependence on Western-centred insurance infrastructure.

Speaking at the BRICS summit in New Delhi over the weekend, the Russian president called on members to develop their own payment and settlement infrastructure as well as a reinsurance mechanism and grain exchange.

The proposal is not specifically targeted at shipping, but comes as BRICS states increasingly seek insurance capacity insulated from sanctions and Western financial restrictions — with maritime trade emerging as one of the most obvious areas where such an alternative could be deployed.

Iranian president Masoud Pezeshkian went considerably further during the summit, proposing the establishment of a BRICS reinsurance company with $10bn of initial capital, initially to cover major infrastructure and energy projects.

The final New Delhi Declaration also committed BRICS members to exploring a more self-reliant insurance ecosystem to support trade and increasing the group’s collective reinsurance capacity.

Marine liability insurance remains overwhelmingly concentrated within the International Group of P&I Clubs. The origins of its pooling system date back to 1899, when six British P&I clubs agreed to share large claims. Today its 12 member clubs provide liability cover for around 87% of world ocean-going tonnage.

However, that structure has increasingly collided with geopolitics. Western sanctions against Russia have demonstrated the influence insurance and reinsurance can exert over maritime trade, while the wars around the Middle East have similarly exposed shipowners to sudden changes in war-risk capacity and pricing.

Several emerging economies are responding by developing alternatives. India, for examples, this year created the Bharat Maritime Insurance Pool, backed by a sovereign guarantee of INR129.8bn ($1.4bn), covering hull and machinery, cargo, P&I and war risks. New Delhi explicitly cited excessive dependence on International Group P&I cover and the risk that insurance could be withdrawn because of sanctions or geopolitical tensions.

Putin’s proposal potentially takes that concept from the national to the multinational level. Russia has been promoting a BRICS reinsurance structure for several years, while BRICS working groups have studied various models, including the creation of an interstate BRICS Re company.